Sebi proposes to increase SME IPO application size, issues consultation paper

The Securities and Exchange Board of India (SEBI), the country's capital market regulator, on Tuesday released a consultation paper on initial public offers (IPOs) in the small and medium enterprise (SME) segment. Among key proposals, the regulator has suggested increasing the application size in the SME IPO category to Rs 2 lakh or Rs 4 lakh. It has also proposed to align certain SME IPO rules with those applicable to mainboard issues.

As per the Sebi proposals, out of the portion reserved for large investors, one-third will be set aside for those investing up to Rs 10 lakh whereas the remaining two-thirds will be for other investors in the category.   

The market regulator has also proposed to increase the number of minimum investors from 50 to 200. 

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Within the SME IPO segment, it has suggested restricting the size of offer for sale (OFS) at 20 per cent of the total issue size. 

The regulator has also proposed to monitor funds in SME IPOs above Rs 20 crore. 

It also seeks to increase the lock-in period applicable to promoters to 5 years from the current 3 years, as per the consultation paper. 

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Sebi has suggested limiting the permissible allocation of funds for general corporate purposes to the lower of a maximum of 10 per cent of the issue or Rs 10 crore. 

The regulator has proposed to ban the entire promoter group if any of an SME IPO-bound company's promoters are found to be wilful defaulters, absconders, financial criminals, or entities already banned by it.

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It has also proposed to ban SME IPOs aimed at repaying loans availed by the promoter groups or related parties. 

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